If you live in the UK, owe more than 15,000 pounds in debts to three or
more creditors and you need help with your debts, then an IVA may be the
solution to your problems. There are thousands of people every year who end up
having to file for bankruptcy, but you do not need to be one of them. An IVA
will have a negative impact on your credit but it will not be for more than 6
years. The IVA will be paid up in 5 years and then you will be free of all your
What is an IVA? Well it is an alternative to bankruptcy and IVA stands for individual voluntary arrangement and it is a way to get a lot of your unsecured debt written off. It will not jeopardise your home like with a bankruptcy. It is a formal agreement between you and your creditors. Once an individual voluntary arrangement has been accepted by your creditors, they are bound to it and cannot change their minds.
They will no longer be allowed to harass you and the loan or credit card interest will be frozen so it will not continue to grow. After you make your payments for five years whatever is left unpaid will be waived and you will be debt free. This does not include your house payment. A house payment is a secured loan and you will continue to make that payment.
This arrangement is only available in the United Kingdom and you will need to hire an insolvency practitioner if you want to set up one of these voluntary arrangements. Their job is to see what you can afford to pay back and to talk to your creditors to see if a plan can be worked out. They will try to get the IVA approved by your creditors. At least 75% of the creditors have to agree to the IVA for it to be approved. If the others disagree with it they will still have to accept it.
It is true that an IVA affects your credit but in about six years your credit will be good once more and you will be able to purchase on credit again. In this day and age, being able to buy on credit is important. There are times when it is necessary. Many people cannot afford to pay cash for large purchases and must rely on credit to get them. That is why it is worthwhile to see if you are eligible for an IVA. You will be paying back a percentage of what you owe. This will be reported on your credit. Making your payments on time will also be reported to your credit. You will only have to pay back a small portion of what you actually owe however. Since you will not be paying back the full amount owed your credit will also take a negative hit.
You should consider an IVA before filing for bankruptcy. It is better on your credit, you do make an attempt to pay back a portion of what you owe, you will not jeopardize your home and it is kept private. It will not affect your job like a bankruptcy could. No one has to know about an IVA, whereas bankruptcies are advertised in the newspapers. This may be the perfect way for you to get out of debt and back on your feet.
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